S&P puts spotlight on middle-market sales

A major rating agency has concluded that selling to moderate-income consumers will improve insurers' finances.

The rating agency, Standard & Poor's, underscored that view this week by putting a panel discussion on reaching middle-marketcustomers on the agenda for its latest annual insurance industry conference.

The members of the panel included top-level executives: Kenneth Janke, president of AFLAC U.S. (NYSE:AFL); William Wheeler, president for the Americas at MetLife (NYSE:MET); and Glenn Williams, president of Primerica (NYSE:PRI). The panelists' companies have been using different strategies for reaching middle-market customers.

Primerica has used technology to support agents, but the company assumes most sales will involve having an agent sit face to face with the customer, or talk to a customer on the telephone. Many consumers say they want to buy life insurance and related products through the Internet, but the percentage who actually do so is tiny, the president of Primerica said.

He also said that the Internet is good at conveying information, but that what a company needs to do to close a sale is to give a consumer both targeted information and the motivation to buy. "I think human intervention is here to stay," Williams said.

Wheeler, the MetLife executive, said he thinks "change is coming," because digital marketing is so powerful, and because consumers are more willing to buy through the Internet. But he said designing life products for Internet-based middle-market distribution systems can be tricky.

Few middle-market consumers wake up and decide they want to buy life insurance, Wheeler said. Those who do "are generally not great life risks (takers)."

Even though selling through the Internet may be cheaper than having a real person make the sales, an insurer may need to charge higher premiums for coverage sold through the Internet to compensate for anti-selection risk, Wheeler said.

Also during the session, the executives pointed out the following:

Williams said Primerica wants to "serve the middle-market," not just "sell to the middle-market." In some cases, he said, he sees other companies in that segment selling what believes are products with a low financial nutritional value, such as term life products with a very low death benefit.

Janke said Aflac is selling more products on a guaranteed-issue or simplified-underwriting basis. The claims may be higher, but the agents who sell the products are happier and more productive, he said.